Weekly Business Roundup: Weak IIP Growth, Greek Woes Hit Markets

India Weekly Business News

India Weekly Business News

Markets This Week

Worries over the outcome of the Greek debt crisis and its effect on global and Indian economy loomed large this week. The robust monsoons experienced by India this summer may now prompt farmers to move to kharif crops early this year, and yet predictions of a strengthening El Nino have also caused the markets much anxiety. Leading Asian indices, too, remained volatile this week.

The 30-stock sensitive index, S&P BSE Sensex closed the week ending 10 July 2015 at 27,661.40 points (a drop of 431.39 points or 1.53 per cent from last week’s closing at 28,092.79 points). The Sensex snapped a three-week-long winning streak following disheartening May IIP rates. Absence of any cheerful domestic triggers such as robust Q1 earnings also failed to move the equity markets. The other key equity index, the 50-scrip NSE CNX Nifty closed the week at 8,360.55 points – a decline of 124.36 points or 1.46 per cent from its last weekly closing 8,484.90 points.

Market watchers and experts have been advising caution for a while now. Long-term and well-calculated investments shall be the advice for the forthcoming week as well. On the IPO front, Bandhan Bank, the first bank to be established in the state of West Bengal after Independence, also announced its intentions to go for an IPO in 2018. The nation’s largest software developer, Tata Consultancy Services, declined for four consecutive days following sub-par sales reports for the first quarter of the fiscal year. TCS closed the week at 2471.90 per share (BSE trade prices).

Back at the bullion market, gold prices eased moderately with subdued demand this week. A volatile economic scenario has slowed down gold purchases and standard gold closed on Friday at INR 26,050 per 10 grams. Silver prices, however, showed a steady increase due to industrial demand and demand from coin manufacturers. The metal closed trade on Friday at INR 35,950 per kg.

May IIP Growth Slows to 2.7 Percent

India’s industrial production (IIP) growth dipped from 3.36 per cent in April 2015 to 2.7 per cent in May. The IIP growth was pegged at about 5.6 per cent a year ago. The slowing down of industrial production has initiated another demand for the Reserve Bank of India to cut lending rates. April IIP growth was revised to 3.36 per cent from 4.1 per cent. Manufacturing makes up over three quarters of the IIP Index. Growth in manufacturing shrunk to about 2.2 per cent in May vis-a-vis a 5.9 per cent growth in the same month the last year. Consumer goods output reduced by 1.6 per cent, consumer durables by 3.9 per cent and consumer non-durables by 0.1 per cent. In the first two months of the financial year taken together, industrial growth was pegged at 3 per cent in comparison to a 4.6 per cent growth in the same months of 2014-15. The RBI, however, will consider a number of factors before initiating a rate cut.

Xiaomi to Launch E-Commerce Portal in India

The third-largest smartphone maker in the world, Xiaomi Corporation has decided to come up with a complete e-commerce business focused on selling and servicing its phones and other devices in India. Apart from driving sales through its website, the Beijing-based company is also planning to set up warehouses and decide on logistics to come up with its own sales channel instead of depending on partners such as Amazon, Flipkart, etc. This announcement comes close on the heels of Xiaomi’s decision to launch a number of non-phone products in India. The $45-billion company has already launched a number of products including power banks, headphones and Wi-Fi routers in the US and some European countries.

One Million Give Up LPG Subsidy

According to news reports released this week, over one million Indian LPG consumers have agreed to surrender the subsidy on cooking gas. Last year, Prime Minister Narendra Modi had sounded the call for Indian households above poverty line to surrender their LPG subsidy, thus enabling the government to provide poor and low-income group families with gas connections. Currently, these families use wood, coal, and kerosene as fuel.

The three LPG suppliers in the country, Indian Oil (Indane), Hindustan Petroleum (HP Gas), and Bharat Petroleum (Bharat Gas) provide cooking gas to about 15.3 crore consumers and incur a subsidy cost of over INR 40000 crore each year.

The government and the LPG companies mounted a highly charged audio-visual campaign asking consumers to give up the subsidy. Uttar Pradesh has the highest number of people who have given up their LPG subsidy (about 2.09 lakh have responded). Maharashtra is close behind.

Tata Motors Bags INR 900-Crore Army Deal

Tata Motors, one of the leading automobile manufacturers of the country, has secured an order worth INR 900 crore from the Indian Army. The Tata Group-owned company will supply the army with 1200 high mobility multi-axle (6X6) trucks. This is the largest order awarded by the army to an Indian company dealing in land systems.

The trucks that Tata Motors shall be supplying will be used for transporting ammunition and other equipment across the country, especially in difficult mountainous terrain. According to the company, the Tata 6X6 high mobility vehicle which has been tested in extreme conditions for over two years and has withstood about half a year of maintainability trials, is best suited to meet the army’s requirements.

Unofficial reports also suggest that the Indian Army may phase out its signature vehicle, the Maruti Suzuki Gypsy and replace it with Tata Safari Storme. The company may also make a bid to build combat vehicles. The automobile manufacturer headquartered in Mumbai is currently trading at the BSE for 401.95 per share (Friday closing value).